G-8 Glossary
bre44380_glo_G1-G18 8 10/08/15 06:54 AM
Flow-to-equity method Discounted value of cash flows to
and from equityholders.
Foreign bond A bond issued on the domestic capital
market of another country.
Forex Foreign exchange.
Forfaiter Purchaser of promises to pay (e.g., bills of
exchange or promissory notes issued by importers).
Forward contract Agreement to buy or sell an asset in the
future at an agreed-upon price.
Forward cover Purchase or sale of forward foreign
currency in order to offset a known future cash flow.
Forward exchange rate Exchange rate fixed today
for exchanging currency at some future date (cf. spot
exchange rate).
Forward interest rate Interest rate fixed today on a loan
to be made at some future date (cf. spot interest rate).
Forward rate agreement (FRA) Agreement to borrow or
lend at a specified future date at an interest rate that is fixed
to d ay.
Forward price Agreed-upon price for a forward contract.
FRA Forward rate agreement.
Free cash flow Cash not required for operations or for
reinvestment.
Free-rider problem The temptation not to incur the costs
of participating in a decision when one’s influence on that
decision is small.
FRN Floating-rate note.
Full-payout lease Financial lease.
Full-service lease (rental lease) Lease in which the lessor
promises to maintain and insure the equipment (cf. net lease).
Fundamental analysis Security analysis that seeks to
detect misvalued securities by an analysis of the firm’s
business prospects (cf. technical analysis).
Funded debt Debt maturing after more than one year (cf.
unfunded debt).
Futures contract A contract to buy a commodity or
security on a future date at a price that is fixed today.
Unlike forward contracts, futures are traded on organized
exchanges and are marked to market d a i ly.
Futures exchange Exchange where futures contracts are
traded.G
GAAP Generally Accepted Accounting Principles.
Gamma A measure of how the option delta changes as the
asset price changes.
Gearing Financial leverage.
General cash offer Issue of securities offered to all
investors (cf. rights issue).Factoring Arrangement whereby a financial institution
buys a company’s accounts receivable and collects the debt.
Fair price provision Appraisal rights.
Fallen angel Junk bond that was formerly investment grade.
FASB Financial Accounting Standards Board.
FCIA Foreign Credit Insurance Association.
FDIC Federal Deposit Insurance Corporation.
Fear index VIX.
Federal funds Non-interest-bearing deposits by banks at
the Federal Reserve. Excess reserves are lent by banks to
each other.
Fedwire A wire transfer system for high-value payments
operated by the Federal Reserve System (cf. CHIPS).
Field warehouse Warehouse rented by a warehouse
company on another firm’s premises (cf. public warehouse).
Financial assets Claims on real assets.
Financial engineering Combining or dividing existing
instruments to create new financial products.
Financial institution A bank, insurance company, or
similar financial intermediary.
Financial intermediary An organization that raises money
from many investors and provides financing to individuals,
corporations, and other organizations.
Financial lease (capital lease, full-payout lease) Long-
term, noncancelable lease (cf. operating lease).
Financial leverage (gearing) Use of debt to increase the
expected return on equity. Financial leverage is measured by
the ratio of debt to debt plus equity (cf. operating leverage).
Firm commitment Arrangement whereby the underwriter
guarantees to sell the entire issue.
Financial markets Markets in which securities are issued
and traded.
Fiscal agency agreement An alternative to a bond trust
deed. Unlike the trustee, the fiscal agent acts as an agent of
the borrower.
Flat price Clean price.
Flipping Buying shares in an IPO and selling immediately.
Float See availability float, collection float, payment float.
Floating lien General lien against a company’s assets or
against a particular class of assets.
Floating-price convertible Death-spiral convertible.
Floating-rate note (FRN) Note whose interest payment
varies with the short-term interest rate.
Floating-rate preferred Preferred stock paying dividends
that vary with short-term interest rates.
Floor planning Arrangement used to finance inventory.
A finance company buys the inventory, which is then held in
trust by the user.